Hidden Degradation Costs in Energy-Cost-Only HEMS Optimisation: Study on Battery and PV Sensitivity

Abstract

Residential battery energy storage systems (BESS) are increasingly deployed alongside photovoltaic (PV) generation to reduce household energy costs under volatile time-of-use (TOU) tariffs. Model predictive control (MPC) is a widely adopted optimisation strategy for home energy management systems (HEMS), typically formulated to minimise net energy cost, subject to physical and operational constraints. However, battery degradation is rarely embedded in the optimisation objective, meaning its cost is unquantified and aggressive; high-cycle-count strategies could incur significant losses once deployed to physical systems. This paper presents a receding-horizon mixed-integer linear programming (MILP) baseline for a UK residential HEMS, using demand data from the REFIT dataset. A 3 by 3 sensitivity study is conducted across three battery sizes and three PV array sizes, with post-hoc degradation cost estimated using the Naumann stress model and rainflow cycle counting. Results show that degradation remains constant for each battery size and can exceed energy cost savings by up to 1,060 %. These results demonstrate that energy-cost-only optimisation systematically underestimates the true system cost, motivating a degradation-aware control formulation.